Taxing choices

Over recent years, the political leadership needed to keep the country on the path to prosperity has been lacking. Instead of doing what’s right, leaders have become obsessed with doing what’s popular.

The Governor-General issued the writ recently, which is the formal instruction to the Electoral Commission, to hold the general election on Saturday, 17 October 2020. Under the Electoral Act, the writ must be issued within seven days of the dissolution of Parliament, and it must be returned with the final election results within 60 days – by Thursday, 12 November unless a recount application is received.

Advance voting starts on Saturday, 3 October.

Writ day also marks the beginning of the ‘election period’, when party-political election broadcasting can begin. The Electoral Commission allocates taxpayer-funded time to parties based on factors such as previous election results and polling.

A key fallacy that often emerges at this stage of an election cycle is the notion that tactical voting can strategically influence coalition outcomes.

We saw this at the 2017 election, when voters of all political persuasions supported New Zealand First on the basis that if Winston Peters was part of a new government, he would introduce a referendum on the future of the Maori seats.

Although New Zealand First was indeed part of the new government, the referendum was conveniently dropped from the political narrative leaving many voters disillusioned.

This election, it appears the prospect of a government with the radical Greens in a more powerful position is causing some to consider voting for Labour to ensure they can govern alone.

However, they should reflect on the fact that no single party has ever managed to gain sufficient votes to govern alone throughout the entire 24-year history of MMP.

Furthermore, there is no guarantee that Labour would not ‘reach out’ to the Greens and bring them into government, similar to what happened in 2014. At that election, National had enough MPs with ACT and United Future to govern without needing the support of the radical Maori Party. It nevertheless drew them into government and adopted many of their extremist policies, much to the horror of those who had voted for National to keep them out.

In other words, there are no guarantees that Labour would not bring the Greens into some form of governance arrangement.

As the country looks to the future, the question for many voters is which party will best help New Zealand recover from the recession caused by Labour’s hard-line lockdown. 

Three new surveys have shed light on the way voters are thinking.

TVNZ’s self-selected Vote Compass survey shows respondents rate the economy as the number one issue of concern, followed by the Government’s response to the pandemic crisis, then health.

This compares with the last election, where health was the top issue, followed by the economy, then housing.

The Westpac McDermott-Miller Consumer Confidence Survey of 1600 people shows public confidence has fallen to its lowest level since the global financial crisis. It indicates consumers are extremely concerned about rising joblessness, the ongoing border closure, and the recent flare up in Covid-19 infections. Lower consumer spending is expected throughout the rest of the year.

The 2020 Deloitte and Chapman Tripp Election Survey reveals that 91 percent of business voters do not want higher income tax, 88 percent don’t want higher corporate tax, and 86 percent believe economic well-being should take priority over social (7 percent), environmental (6 percent) and cultural (less than 1 percent) well-being.

Of the survey participants, 80 percent think building infrastructure will be useful to the recovery, 79 percent believe more should be done to reduce regulations on business, and 60 percent are uncomfortable with New Zealand’s debt reaching 53 percent of GDP by 2023.

While over 65 percent of respondents think the Government does not have a coordinated plan for raising New Zealand’s economic performance, this problem is not new.

This week’s NZCPR Guest Commentator, businessman and former Director of the NZIER Dr Kerry McDonald, believes the country has lacked good economic management for decades, largely as a result of poor political leadership:

“In 2003 a comprehensive study of the NZ economy concluded that ‘Compared to other OECD countries, New Zealand’s growth in real GDP per capita was slow. New Zealand went from being one of the richest OECD countries…. to one of the poorest’.

“So this paper is not a prediction of future problems but a documentation of what has already gone seriously wrong, over some decades and a why things will now only get worse. It is also a highly critical judgement on the incompetence and ineffectiveness of New Zealand’s political leadership over some decades…

“The fundamental cause of the problem is the lack of capable political leadership to implement the necessary policies, and politicians’ strong preference for the personal rewards of being in power ahead of improving National living standards.”

In reality, New Zealand’s only periods of genuine economic reform occurred during the late eighties and early nineties, when the country emerged from the ravages of years of protectionism culminating in a three-year wage and price freeze imposed by Prime Minister Sir Robert Muldoon.

In 1984 Labour’s new Minister of Finance, Sir Roger Douglas began a comprensive economic reform programme – floating the dollar, reducing taxes, eliminating subsidies, and introducing a multitude of changes including the State-Owned Enterprise Act, the State Sector Act, the Reserve Bank Act, and the Public Finance Act.

These, together with the Employment Contracts Act and the Fiscal Responsibility Act – later passed by National’s Minister of Finance Ruth Richardson – transformed New Zealand from an economic basket-case to a prosperous modern economy.

But as Dr McDonald says, over recent years, the political leadership needed to keep the country on the path to prosperity has been lacking. Instead of doing what’s right, leaders have become obsessed with doing what’s popular.

A few years ago the Economist attributed the economic successes of Sweden, Denmark, Finland, and Norway to the fact that they had reduced government spending and balanced their budgets by lowering taxes, ensuring greater flexibility in the workplace, encouraging entrepreneurs, and restricting welfare entitlements.

So, if that is a winning strategy, how do the main political parties, who are claiming they intend to rescue us from the economic crisis Labour has created, stack up?

Abysmally, as far as the Greens are concerned. Even though lower taxes are the key to economic growth, the Greens plan to raise them. They would penalise wealth creators with two new higher tax rates of 37 percent on income over $100,000 and 42 percent on income over $150,000 – along with a wealth tax of 1 percent of all assets worth over $1 million including the family home payable each year, and 2 percent over $2 million.

Labour also wants to penalise wealth creators with a tax increase. Emulating Helen Clark’s Labour Government, they would raise the top rate of personal income tax from 33 percent to 39 percent on income over $180,000.

These parties are ignoring the lesson from the economic reforms of the eighties – when the top rate of income tax was halved from 66 cents to 33 cents, within two years income tax receipts were higher. As Treasury has explained, by discouraging investment, hard work and entrepreneurship, “high marginal tax rates on personal and company income are the most damaging to growth”. Especially in a recession.

ACT is the only party to have prioritised lower income taxes with a plan to drop the 30 percent rate to 17.5 percent.

At this stage, all National has said is that they will not increase taxes nor introduce any new taxes if they win the Treasury benches in October.

Sadly, the promise that “Crusher Collins” would revive the fortunes of the National Party when she became their leader has failed to materialise. In their race to the centre, National’s strategists appear to have become so obsessed with trying to out-do Labour’s ‘niceness’ that National’s new leader is fast losing her point of difference.

What they are missing is that many voters are hankering after that straight-talking style that was part of Judith’s brand – a leader not afraid to call a spade a spade, speaking out against the creep of race-based privilege, opposing the climate extremism that threatens to bankrupt the country, and refusing to kowtow to the PC brigade that is trying to silence our freedom of speech.

The harsh reality is that unless National comes to their senses soon, Judith Collins will lead the party to a resounding election defeat.

What the country needs right now is a modern-day Kiwi equivalent of Margaret Thatcher, who revived Britain from its post-war economic stupor. She had the courage to introduce a fearless policy agenda that injected new life into their moribund economy.

And what were the radical policies that kick started Britain’s revival?

Nothing more than a belief in the drive and resilience of the British people – and the knowledge that if the government backed them to unleash their energy and expertise, then got out of their way, they would have the freedom to forge a better future for themselves, and in the process lift the fortunes of all.

The question is whether any of our political leaders have the courage to step up and do the right thing – lower taxes to unleash entrepreneurialism, creativity and growth; slash the red tape and regulations that are holding back progress; and put government spending under the microscope to reduce waste. 

At this stage, the only party coming close to the policy agenda used by Margaret Thatcher to rescue Britain from its economic malaise is ACT, which may explain why UMR has them rising in their poll to over 6 percent – at the expense of National, which remains mired under 30 percent.

Margaret Thatcher’s stirring speech to a small business conference in 1965 gave so much hope for the future that it is worth repeating extracts here:

This Government believes in small business. Because small firms are indispensable to the creation of jobs and of wealth. Firms with fewer than 200 employees produce about a fifth of our national income; employ one in four of the total workforce; and provide one job in three in the private sector.

Small firms can be a seed-bed for new ideas and a testing ground for new ways of working. They often lead the way in new products and new services. They put the customer first. They have to, to survive in a fast-changing world.

We support small businesses because they embody freedom and independence. They are the roots of a free society. For in the words of one American President: “Energy in a nation is like sap in a tree; it rises from the bottom up; it does not come from the top down.”

We seek a society

  • where people make their own choices and take responsibility for their decisions.
  • where rewards are related directly to one’s efforts.
  • where people have a stake in its success.
  • where individual initiative rather than the diktat of Government provides the driving force.

Running a small business involves great risks. But to run those risks the rewards must be there. That means that taxes must be cut.

If we are to reduce taxation, we must hold down public expenditure.

The pressures for more public spending are remorseless. But the Government will resist them. Even though we may be opposed by powerful interests our duty is to speak up as well for the taxpayer, the ratepayer, the businessman, the wealth-creator. In a free society, government must leave more in the pockets of the people, to spend as they decide.

I came to office with one deliberate intent: to change Britain from a dependent to a self-reliant society—from a give-it-to-me, to a do-it-yourself nation.

A get-up-and-go, instead of a sit-back-and-wait-for-it Britain.

This means creating a new culture—an enterprise culture—which accords a new status to the entrepreneur and offers him the rewards to match; which breeds a new generation of men and women who create jobs for others instead of waiting for others to create jobs for them.

That is why this Government has given so much attention to the promotion of the small business. It is not simply that tall oaks from little acorns grow. Small businesses are the very embodiment of a free society—the mechanism by which the individual can turn his leadership and talents to the benefit of both himself and the nation.

The freer the society, the more small businesses there will be. And the more small businesses there are, the freer and more enterprising that society is bound to be.

So my message to you today is quite simple: we will do our best for you, so that you can do your best for Britain.

While Jacinda Ardern’s Government is busy using the election campaign to dish out millions of our tax dollars to their politically motivated interests, Kiwis are already tackling the future by starting new businesses in record numbers.

Imagine the boost a Thatcher-type plan would give to them and all of the other New Zealanders with good ideas, who just want the opportunity and the freedom to do the best they can for their families – and for their country.   

 

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